Abbreviations I use in the post: PDH: Previous day’s high, PDL: Previous day’s low, IB: Initial Balance or First 1 hour range, NVD: Normal variation day (one of the market profile day types), OTD: open test drive, POC: Point of control, HVN (High volume node)
Observation from previous day:
On Thursday, Nifty opened inside previous day’s range and broke PDH is the first 15 minutes. Now after a good sell off in the previous two day, this was kind of a rebound which can be mainly attributed to positive overnight global cues. But after IB range formation and break of IB high, NIfty mostly remained sideways for almost entire day which shows the exhaustion of Bulls in taking the prices up. Also the selling Gap held and is still valid and as we know that the GAP act as resistance (support) zones, we need to be cautious on bulls till this gap is taken out on closing basis.
What can be expected now:
Trade facilitation by bulls above PDH is the key today. In case of poor trade facilitation, we might not be able to fill the gap which would mean sellers still in control. Alao any rejection above PDH or prices trading inside previous day’s range and not able to break PDH is not good for buyers.
PDH and PDL are important levels from previous day’s range. Acceptance below PDH can test the gap zone which is a big resistance zone. Acceptance below PDH can take prices to PDL and below PDL can test virgin POC.
Trade plan for today:
Nifty is expected to open near PDH and there is no clarity at open. We need to wait for prices to settle down and see a clear exhaustion of bulls or acceptance inside previous day range or rejection above previous day’s range for a possible short trade. In case market fills the selling gap, i would not be looking for any short trades.
- Short trades are risky if prices trade above PDH.
- Long trades are risky if prices trade below PDH.
- Banknifty is weaker than Nifty.
Please note that this is a personal view for learning , observational and education purpose and is not a trading recommendation. Trading futures carry a risk, so you should consult a financial expert before taking any risk. Also, Nifty in above statements Indicate Nifty future for current month and not Nifty index.